« PreviousContinue »
It was just such conditions which led the Interstate Commerce Commission examiner, in Increased Rates on Household Goods (I. and S. docket No. M_4739), at sheets 20 and 21, to observe:
Respondents participate in the transportation of military traffic and to the extent they transported shipments under these lower rates, they do so under the provisions of section 22 of the act which permits carriers to transport property for the United States at free or reduced rates. No doubt, such transportation was a contributing factor to the here disclosed financial plight of respondents but this record does not reveal to what extent. However, there is nothing the Commission can do directly or indirectly to eliminate the competitive bidding under the provisions of section 22 for military traffic at rates lower than those in respondents' tariffs lawfully on file with the Commission.
Examination of the letters contained in exhibits Nos. 2 and 3 discloses the fact that independent tariff No. 7 is most commonly referred to in connection with Government traffic. The traffic is said to move at the rates contained in No. 7, or at some reduction of from 5 to 20 percent below No. 7, or at rates contained in independent tariff No. 8 when such rates are below the rates contained in tariff No. 7.
In order that the significance of this may be understood, it is necessary to explain that approximately 80 percent of the interstate movers participate in the rate level generally represented by Tariff No. 47-A, MF-I. C. C. No. 57, published by the Household Goods Carriers Bureau. Most of the remaining 20 percent of the interstate movers participate in the rate level generally represented by Tariff No. 10, MF-I. C. C. No. 24, published by the Movers & Warehousemen's Association of America, formerly the Independent Movers and Warehousemen's Association. The rates published in tariff No. 10 vary approximately from 7 to 10 percent less than those contained in Tariff No. 47-A. In other words, the estimated 3,300 interstate movers subject to the jurisdiction of the Interstate Commerce Commission employ the rate levels contained in the two tariffs represented by tariff No. 47-A and tariff No. 10.
Government traffic moving at reduced rates, however, is moving on rates contained in tariff No. 7, or some reduction therefrom. In some instances, Government traffic is moving at rates contained in former Independent Movers & Warehousemen's Tariff No. 4 (exhibit No. 2, letter 15). Tariff No. 4 was published and became effective on August 1, 1943, and was succeeded on April 1, 1946, by Independent Movers & Warehousemen's Tariff No. 5. There are no lawful participants in tariff No. 4. Tariff No. 5 also applicable on Government traffic from some installations, was succeeded by tariff No. 6 on April 19, 1948, although for all practical purposes is as obsolescent as tariff No. 4, having only one participant with limited authority as shown in exhibit No. 13. The only four lawful participants in tariff
No. 6 are shown in exhibit No. 14. Tariff No. 6 was succeeded by tariff No. 7 effective December 31, 1950, and, in turn, was abandoned by the overwhelming number of its participants in favor of tariff No. 8 which became effective September 29, 1951. Tariff No. 8, MF-I. C. C. No. 22, later designated as Tariff No. 8A, MF-I. C. C. No. 27, was abandoned in favor of tariff No. 9, effective September 15, 1953. And effective January 10, 1955, the preponderating number of members of the Movers & Warehousemen's Association abandoned the rates contained in No. 9 in favor
of tariff No. 10. In short, there have been three general rate increases since tariff No. 7 was the general rate level employed by more than 400 interstate movers.
As can be seen in exhibit No. 15, there are only two lawful participants in tariff No. 7 at the present time. Both carriers are restricted to radial operations which extend over limited areas. Nevertheless, the obsolesecent rate structures-or reductions therefore—long since abandoned by all but a handful of carriers, are employed for the preponderance of Government traffic moving at reduced rates.
The significance of these reductions becomes all the more apparent by reference to the analysis of reductions from the prevailing lawful rate structures contained in exhibit No. 16. Reductions from tariff No. 47-A—the rate structure employed by 80 percent of the interstate movers—and from tariff No. 10—the rate structure employed by most of the remaining 20 percent of the industry-to the rate structures of tariffs Nos. 6 and 7 are illustrated in this exhibit.
In Increased Rates on Household Goods (I. & S. docket No. M-4739), the Military Establishments disclosed that 90 percent of military shipments move in the weight bracket from 2,000 to 3,999 pounds and mileage bracket of 600 to 1,800 miles. Hence, only those rates are shown.
Government traffic moving on tariff No. 6 rate structure moves at from 17.3 to 22.3 percent below the rate structure on tariff No. 10 and from 22.1 percent to 27.3 percent below the rate structure of tariff No. 47-A. "Government traffic moving on tariff No. 7 rate structure moves at from 14 to 16 percent below the rate structure of tariff No. 10 and from 19.8 percent to 21.2 percent below the rate structure of tariff No. 47-A. To the extent that Government traffic moves at reductions from tariffs Nos. 4 and 5, such traffic moves at even greater reductions from the prevailing rates applying to the general public.
The effect on earnings and the financial condition of the moving industry is illustrated in the abstract of earnings found in exhibit No. 17.
Examination of this exhibit reveals that a number of class I carriers are operating at a loss and, where this is not true, the margin of revenue is uncomfortably close to the cost of operations.
The following table, compiled upon information taken from exhibits introduced before the Senate Subcommittee on Surface Transportation in 1954 during testimony on S. 904 and from exhibit No. 17, illustrates the perilously narrow margin of profit on which the largest carriers in the moving industry have operated over the past 5 years.
The table graphically illustrates the intolerable earnings position and financial condition of the moving industry. Such condition prevails despite the fact that general rate increases were obtained in 1951 and again late in 1953. And it should be noted that the operating ratios are computed before deductions for Federal and State income taxes, which admittedly cannot amount to a significant sum in view of such narrow margins of profit.
Although the figures illustrated relate to the larger movers, it is a reasonable assumption that the smaller movers suffer even more from the destructive practices prevailing upon Government traffic and close daily contact with such carriers confirms that to be a fact. The larger movers, by a more complete organizational setup are in much better position to employ economics of load factor and minimum empty miles than the thousands of small movers. Thus, where the larger carriers were retaining approximately 2 cents out of every dollar of revenue before income taxes last year, the smaller movers were retaining even less.
Under such conditions, no carrier has the incentive nor is it able to expand, improve, and innovate better service and techniques of doing business. In fact, the practically nonexistent level of profit is responsible for the deterioration in quality of service available to the moving public. Considering that military shipments alone constitute an estimated one-sixth of the moving industry's total volume of interstate business, and, in some instances, as much as one-half or more of an individual mover's business, the reduced rates under which such traffic moves very seriously affects the service available with adverse and detrimental consequences as we have endeavored to demonstrate in the foregoing presentation.
OBJECTIONS WHICH MAY BE ANTICIPATED Government procurement agencies opposed to elimination of section 22 invariably advance the argument that flexibility in rate publication and rate adjustment would be eliminated. It is contended that published rates may not be available when needed between isolated points which are located off the main commercial routes or in event of catastrophe, war, or other emergency. The fact is all movers publish rates which are based on mileage and weight factors and rates between every point in the country, irrespective of how isolated, can be computed immediately from tariffs on file with the Interstate Commerce Commission.
With respect to the need for flexible rate adjustment, there exists under the present law and regulations provision for filing tariff changes on less than 30 days' notice where actual emergency and good cause are shown to exist (49 U.S. C., secs. 6 (3), 317 (c), 906 (d), and 1005 (d)). (See for example Tariff Circular MF-3, rule 21 (a).)
Beyond this it obviously was intended that the purpose of public regulation was to put an end to flexible rate adjustments which experience, prior to regulation and now in connection with Government traffic, has shown to result in demoralized transportation conditions.
With reference to the avowed need for security as an argument against rate publication with the Interstate Commerce Commission, very often items which would require secrecy in connection with their movement are of highly fragile, delicate, or valuable nature and require a high degree of specialized service and equipment and for such reason would be moved, as commercial firms do, in closed moving vans under the designation of "household goods as defined by the Commis
sion.” Government agencies frequently handle sensitive movements in this manner in recognition of sound commercial practices and the practical advantages of the service available.
The service requirements are similar to that required for the movement of delicate and valuable items in and out of homes and movers simply identify their shipments on bills of lading and freight bills as "household goods as defined by the Commission” since to do otherwise by listing the individual items contained in a shipment on such documents would be unduly burdensome.
Insofar as movers are concerned, therefore, the argument involving "security” is not sound.
Another argument against elimination of section 22 which is advanced regularly is that such amendment would cost the Government additional millions of dollars. There are two considerations here, however, which all too often are overlooked. The first properly may be the consideration that to the extent private shippers contribute to the losses sustained on Government traffic, the cost of Government is transferred from the general public to such shippers.
The second consideration is that the savings claimed through use of reduced rates are largely illusory. Not only is there a duplication of regulatory effort by each agency which procures transportation services but there are additional administrative costs involved, as readily admitted by the witness for the Department of Defense, in seeking out the cheapest transportation rates. The expert staff maintained by the Interstate Commerce Commission likely is exceeded in size by the various military establishments, the General Accounting Office and the other executive agencies which procure transportation services, audit payments, maintain inspectors, handle negotiations, settle claims, and otherwise engage in analyzing traffic and rates. Moreover, the cost of settling claims undoubtedly would represent a startling sum if the information were made available. Quite by chance it was learned in 1954 that the Air Force alone paid to its personnel damage settlements as follows: 1951, $190,719; 1952, $237,779; and 1953, $430,648.
We can only assume that the other military branches of the Government have experienced the same rise in claims payments, but this is knowledge which only the military can furnish and very obviously must be charged to the alleged savings under section 22, reduced rates.
We would respectfully urge, therefore, that careful consideration be given to any contention of alleged savings under section 22, or any other similar reduced-rate provision advocated, for its true value as to exact cost to the Government and to the cost inflicted upon military personnel and the shipping public by way of demoralized and unsatisfactory service.
CONCLUSION In conclusion, it is sincerely hoped that we have impressed the members of this subcommittee with the need to correct the abusive conditions which have been brought about under a double standard of Government regulation. The forces of supervised, expert control exercised by the Interstate Commerce Commission and the several State regulatory bodies in the public interest are virtually nullified by the contrary forces exercised by those Government agencies which demand harsh and destructive competitive practices for participation in the traffic which they hold out. Not the least galling element in the ordeal of the honest and conscientious mover is the offhand indifference and complacency of the Government toward sharpsters and those who cut corners in observing the law.
We cannot express too strongly the urgency for early and favorable consideration by this subcommittee of the principle contained in H. R. 525, which was introduced early in the first session of this congress and which is before you for consideration.
Mr. HARRIS. Thank you very much, Mr. Rowan, for a thorough and well prepared statement on this subject from the viewpoint of the association which you represent.
Mr. Rowan. May I in turn, Mr. Chairman, thank you and the members of your committee for the privilege of coming here. I am sorry for the length of time that it has required, but I am pleading the case of a sick industry, sick financially and morally. I do hope I have made my case clear. Thank you.
Mr. Harris. You may have the privilege of including with your statement your exhibit No. 1, which is a list of those affiliated with your organization. We will receive the rest of your exhibits for the files and will have an opportunity to go over them to determine which ones it would be advisable to include in the record.
Mr. Rowan. Thank you, sir.
Birmingham Warehousemen's Club, Birmingham, Ala.